Daily Newsletter 3/21/25
Good morning.
Triple Witching
Today, March 21, 2025, marks the first triple witching event of 2025, where stock options, stock index futures, and stock index options contracts simultaneously expire. This event occurs on the third Friday of March, June, September, and December.
This convergence of expirations typically leads to increased trading activity and market volatility, particularly during the final hour of trading before the closing bell at 4 PM Eastern Time. Today's triple witching is particularly significant, with contracts worth $4.5 trillion set to expire on Wall Street. Traders and investors should be prepared for potential significant market shifts and unusual price movements as market participants close out, roll over, or exercise their expiring positions.
Triple witching causes volatility in the stock market due to the simultaneous expiration of three types of financial derivatives: stock options, stock index futures, and stock index options. This event occurs four times a year, on the third Friday of March, June, September, and December.
The increased volatility during triple witching is primarily caused by:
Large trading volume: Traders and institutional investors must close, roll over, or exercise their expiring positions, leading to a surge in trading activity.
Position adjustments: As contracts expire, market participants need to adjust their portfolios, which can cause significant fluctuations in stock prices and index values.
Hedging activities: Traders may need to hedge their positions, leading to increased buying or selling pressure on underlying securities.
Arbitrage opportunities: Temporary price inefficiencies between the stock and derivatives markets can emerge, prompting arbitrageurs to exploit these discrepancies and further amplify trading volume.
Options exercise: In-the-money options may be exercised, requiring the buying or selling of the underlying stocks, which can impact prices.
Market maker activity: Market makers adjusting their positions can affect supply and demand, leading to changes in stock prices.
NKE
Nike released its fiscal 2025 third quarter financial results on March 20, 2025. Here are the key highlights from the earnings report: